Abstract

As the Korean International Financial Reporting Standards (“K－IFRS” hereafter) are enacted,accounting ambiguity and inconsistence between K－IFRS and tax laws are expected to keep growing, especially in construction contracts. Accounting problems of K－IFRS in construction contracts, which this study analyzes, are as below. First, percentage－of－completion method, which is much fit for most construction contracts than completed－contract method, is hardly accepted in K－IFRS and, as a result, the reliability of financial reporting with percentage－of－completion method could be lowered. Second, though legal entity in most project finance development is developer, construction company should take accounting responsibilities of the development as substantial business entity. Third, though completed－contract method is much fit for sales from rebuilding construction,that accounting method hardly meets the requirements of K－IFRS. Tax law issues in construction contracts, which is related with those accounting issues, are as below. First, accounting principles should be revised to lessen the inconsistence between K－IFRS and tax laws in short－term construction contracts of small and mid－sized companies, which is expected to keep growing. Second, tax laws should be revised to lessen the difference between K－IFRS and tax laws in application of percentage－of－completion method. Third, taxpayers should be allowed to adopt K－IFRS, instead of tax laws, in case the “percentage of completion” is unable to be rationally measured, loss from completed contract is expected, or residential housing is sold before completion.

Keywords

• Construction Contracts
• Korean International Financial Reporting Standards
• Tax Adjustment

Related Articles

• Tax Accounting Effect by the Adoption of K－IFRS 1116 Lease

  Shawn, Hyuk , Jung, Jae－Gyung

  22(2) 39-63

  Abstract Full Text for PDF

• The Effect of the Fair Value Model under IFRS on Tax Reconciliation

  Hyun-Geol Shin , Jae Yeon Jeong

  10(4) 43-73

  Abstract Full Text for PDF

• Necessity of Amendment of Corporate Income Tax Law for the Introduction of International Financial Reporting Standards

  Kim Moonchul , Junkyu Lee

  9(2)

  Abstract Full Text for PDF

• How to Revise Tax Laws to Reasonably Calculate the Education Tax Base of Long-term Non-life Insurance Contracts Based on the Critical Review on a Recent Supreme Court Case

  Byung Wook Jun

  27(2) 181-205

  Abstract Full Text for PDF Full Text for XML

• Does Full Adoption of International Financial Reporting Standards Enhance Information Usefulness of the Notes to the Financial Statements?

  Seong, Yun-Seok

  22(6) 75-112

  Abstract Full Text for PDF